Preston City Council v Oyston Angel Charity
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE HICKINBOTTOM |
| Judgment Date | 19 July 2012 |
| Neutral Citation | [2012] EWHC 2005 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/4678/2012 |
| Date | 19 July 2012 |
[2012] EWHC 2005 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT IN MANCHESTER
(ON APPEAL FROM THE PRESTON MAGISTRATES' COURT
BY WAY OF CASE STATED)
Manchester Civil Justice Centre
1 Bridge Street,
Manchester M60 9DJ
Mr Justice Hickinbottom
Case No: CO/4678/2012
Matthew Reed (instructed by Head of Legal Services, Preston City Council) for the Appellant
William Hanbury (instructed by Legal Officer, Oyston Angel Charity) for the Respondent
Hearing dates: 26 June 2012
Background
Oyston Mill, Strand Road, Preston is, as its name suggests, a substantial former mill, now broken into a number of commercial units. It is owned by Denwis Ltd.
The Oyston Angel Charity (formerly the Oyston Angel Trust, "the Trust") is a charity, set up by a charitable trust deed on 4 February 2005. Its objects are set out in paragraph 2.2 of that deed, as follows:
"The objects of the Trust are the social relief, rehabilitation and the promotion of the welfare (whether material, social or mental) of
2.2.1 offenders and former offenders;
2.2.2 persons under a disability (including, without limitation, those suffering or who have suffered from any form of addiction or substance abuse); and
2.2.3 persons under social or economic deprivation;
by way of any method which shall be recognised as charitable and in particular, but without limitation, by grant or other financial assistance, resettlement, the provision of or assistance with accommodation, education, counselling and the provision of other advice, training, retaining and the finding or provision of work opportunities."
The Trust was registered as a charity with the Charity Commissioners on 30 August 2011, which is conclusive evidence that it is a charity during the period of registration; but in any event, prior to that, the Trust had exclusively charitable objects, and was accepted as a charity for tax purposes. It is uncontroversial that, at all relevant times, the Trust has been a charity as defined in section 67(1) of the Local Government Finance Act 1988 ("the 1988 Act"), i.e. "an institution or other organisation established for charitable purposes only or any persons administering a trust established for charitable purposes only".
On 30 March 2011, Denwis Ltd entered into a Licence Agreement with the Trust, in which they granted the Trust rights over the units at the Oyston Mill, subject to terms and conditions including the following:
i) The Trust was given a right to occupy and use the units (paragraph 4).
ii) The licence was subject to a condition that "the permitted use…shall be for charitable purposes only" (paragraph 5).
iii) The licence was expressed to be personal to the Trust, but the Trust could "sublet" provided that the sub-licensees used the parts sub-licensed for charitable services (paragraph 7).
iv) The Trust was required to pay all rates, if any were payable (paragraph 12(b)).
In respect of that licence, two important points are not in issue.
i) The licence only applied to the units with a rateable value in excess of £2,600, then the value above which an empty rates charge applied. Units below that value were not included. Before the magistrates, the Council suggested that this was evidence that the licence was granted purely for the avoidance of tax, and consequently it could be ignored under the principle established by Furniss v Dawson [1984] AC 474. However, as I understand it, the Council did not actively pursue that contention before the magistrates; and certainly it does not pursue it before this court.
ii) It was common ground before the magistrates, and before me, that, as licensee, the Trust became liable for any rates payable.
All relevant units have been unoccupied for some time (over six months), although one (Unit No 101) has now been sub-licensed to another charity (Methodist Action Northwest Ltd) as a charity shop.
Preston City Council ("the Council") is the relevant rating authority for the purposes of collection of non-domestic rates. It issued demands to the Trust for the payment of rates for 2011–12 in respect of eight units at the mill, which were not paid. The Council consequently applied to the Preston Magistrates' Court, under the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989 (SI 1989 No 1058), for liability orders. The magistrates found that the Trust did not itself intend to occupy the units or any of them; but, primarily on the basis of the restriction on the use to which sub-licensees could put the property, they were satisfied that, when next in use, each unit would be wholly or mainly used for charitable purposes. On that basis the magistrates considered that the units were zero-rated for rating purposes, by virtue of section 45A(2) of the Local Government Finance Act 1988 ("the 1988 Act").
It is against that decision that the Council now appeals.
The Legal Framework
Historically, in general local rates were levied on all occupied premises, but only occupied premises. However, since the mid-20th century, there have been two relevant changes to that principle.
The first change related to the treatment of charities.
London County Council v Erith Parish Churchwardens [1893] AC 562 established that absence of profit was not a ground for exemption from liability for rates; and, following the changes brought about by the Local Government Act 1948, the practice of allowing charities ex gratia reductions of assessments was regarded as inappropriate. The Rating and Valuation (Miscellaneous Provisions) Act 1955, for the first time granted charities formal relief in respect of rates on premises which it occupied.
Section 11 of the Rating and Valuation Act 1961 , re-enacted in section 40 of the General Rate Act 1967, provided that rates could not be more than one-half of the full rate if premises (i) were occupied by a charity, and (ii) were "wholly or mainly used for charitable purposes (whether of that charity or of that and other charities)". The rating authority was given power to reduce or remit payment of such rates, provided that they did not exceed one-half of the amount that would have been chargeable otherwise (i.e. the "full rate"). If the charity ceased to occupy the premises or there was some other change in the occupation of the premises, or if the charity ceased to use the premises wholly or mainly for charitable purposes, the remission ceased (section 11(1) and (4) of the 1961 Act, repeated in section 40(5) of the 1967 Act).
The current provision for charities in occupation of premises is found in section 43 of the 1988 Act. Section 43(5) provides a formula by which certain ratepayers pay one-fifth of the full rate, those being described in section 43(6) as follows:
"(a) the ratepayer is a charity or trustees for a charity and the hereditament is wholly or mainly used for charitable purposes (whether of that charity or of that and other charities), or
(b) the ratepayer is a registered [community amateur sports club] and the hereditament is wholly or mainly used—
(i) for the purposes of that club, or
(ii) for the purposes of that club and of other such registered clubs."
Consequently, under section 43(5), for a charity, liability for only the reduced rate is dependent upon two legally discrete (although usually factually related) conditions: (i) occupation of the rateable property by the charity, and (ii) use of the property wholly or mainly for charitable purposes ( Glasgow Corporation v Johnstone [1965] AC 609 at page 618B-C, per Lord Reid).
The second change related to the treatment of unoccupied properties.
Historically, as I have indicated, liability for rates fell to be paid on occupied properties only. Section 17 of, and Schedule 1 to, the General Rate Act 1967 introduced liability for rates in respect of unoccupied properties, for the first time; but (i) whilst unoccupied, only one-half of the full rate was payable, and (ii) there were exemptions or partial exemptions for some categories of ratepayer, including charities.
That is still, generally, the current position under the 1988 Act. Under section 45, an owner of unoccupied property is liable for rates, at no more than the full rate that would be applicable if the property were occupied but no less than half that rate, the precise multiplicand being subject to Ministerial Order. Section 45A(2) and (3) (introduced by section 1(2) of the Rating (Empty Properties) Act 2007) provide that two categories of unoccupied premises shall be zero-rated for non-domestic rating purposes, thus:
"(2) The first case is where–
(a) the ratepayer is a charity or trustees for a charity, and
(b) it appears that when next in use the hereditament will be wholly or mainly used for charitable purposes (whether of that charity or of that and other charities).
(3) The second case is where—
(a) the ratepayer is a registered [community amateur sports club], and
(b) it appears that when the hereditament is next in use—
(i) it will be wholly or mainly used for the purposes of that club and that club will be such a registered club, or
(ii) it will be wholly or mainly used for the purposes of two of more clubs including that club, and each of those clubs will be such a registered club."
The Issue
Before the magistrates, section 45A(2)(a) was not in issue: for the reasons I have indicated, it was accepted that the Trust was a charity for the purposes of the 1988 Act (see paragraph 2 above).
The issue before the...
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